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PPK: The four most urgent tax changes that should make the government

Foreign Trade Society of Peru ( ComexPerú ) noted that there are four problems in taxation that are seriously affecting the Peruvian business sector and which solution deserves the attention of the incoming administration of the President Pedro Pablo Kuczynski.

“The first (and priority) is to resolve the situation of drawdowns and also withholding of income as revenue, system whereby it is allowed the displacement of the amounts deposited in the drawdown accounts of the companies (in the “Banco de la Nacion”) towards the Sunat and which effects are really burdensome for the taxpayer”, he stated.

He also added that in many cases this scheme keeps frozen large sums of money (even, sometimes, for inconsistencies that finally get solved in favor of the company) generating serious liquidity problems.

The second change is to implement an efficient and faster procedure for the resolution of cases of prescription and compensation, because they are currently long. “This causes that, for example, a taxpayer with tax liability may be subjected to a coactive collection despite of having tax credit, among other situations equally burdensome for the businesses” he said.

To ComexPerú, the third change is to phase out the advance payments for IGV (VAT). He explained that the schemes of perceptions, drawdowns and deductions were created temporarily and now it forces many medium and large companies to adjust or change their own operating systems to perform work collection which is not theirs, generating then extra costs and greater operational cost estimated at S / 36,000 per year, for an average company, for each scheme.
In fourth place is allowing the expense posted may be accepted via deduction in the annual income tax in the year they are incurred. This would be a solution for expenses which were not registered in accrual basis. Therefore, this is a non-deductible expense in the following year.

“This is a very important issue that affects a lot of companies” said the business association. ComexPerú emphasized that what should be clear is that the private sector is a 28%partner of the Peruvian state and the good work of the first institution (Peruvian government) will bring better results also to second (companies).

However, while more than 60% of the economy remains working as informal businesses, things will not improve. It is more than necessary a joint effort between the Sunat and the private sector to achieve a substantial improvement in tax administration, “he said. He also mentioned that only in this way, approaching taxpayers not only to monitor disproportionately but also to raise the efficiency of the state without impairing the operation of the privates; it is how it will be achieve increased incentives for businesses to enter the formal sector.